Bundesbank president labels Trump Comments “More Than Absurd”
In comments to a prominent German magazine yesterday, Bundesbank President Jens Weidmann blamed the United States domestic economic policy for the strength of the dollar.
Reuters reported that
the thesis that foreign currency manipulations are to blame for the current strong U.S. dollar is not borne out by facts.
This is bound to be countered by President Trump but the facts do peak for themselves.
Where we are in the global economic cycle, a strong dollar is only to be expected, given that America has entered into a rate-hike pattern while most of the rest of the developed world is still finding growth hard to come by. Germany is the exception in the Eurozone, seeing both growth and inflation starting to pick up, just as they are in the U.K.
Germany is faced with a conundrum. Having to support the European Central Bank in its policies to create growth and price stability in the Eurozone as a whole, it faces inflation at home with few policy options to counter it.
This is the issue with “one size fits all!”
Japan also feels the need to Justify Policy.
Deputy Governor of the Bank of Japan, Hiroshi Nakaso commented yesterday that Japan still needs massive monetary support to stave off deflation in the world's third largest economy.
He said that the G20 understands that Japan's policies are not aimed at currency manipulation but economic stability in a clear attack on President Trump's comments last week.
Japan is taking a global view on its currency responsibilities referring to the G20 rather than its largest trading partner.
Trump meets Japanese Prime Minister Shinzo Abe tomorrow for a two day summit. Given the relationship between the two countries, the strategic importance of Japan to America in the Pacific may just outweigh any rhetoric on currency manipulation.
U.K. concern of inflation splits MPC
The murmurings regarding inflation and growth prospects that were heard at the Monetary Policy Committee meeting last week are starting to get just a little louder.
MPC Member Kristin Forbes commented that last year's rate cut may need to be reversed sooner rather than later as inflation pick up and growth remains solid.
This is at odds the BoE Governor Mark Carney’s view that the U.K. is facing uncertainty over Brexit and stimulus needs to remain in place, despite inflationary concerns, for the foreseeable future.
The next MPC meeting is on 16th March. It is likely that even if the vote remains at 9-0, concerns over inflation will be voiced more stridently.
There is also concern about the political upheaval should there be another independence referendum announced in Scotland.
A further referendum would be in keeping with current political practice where if a vote takes place which isn’t unanimous, there are either mass protests or another vote is called for until the radicals (those in the minority with the loudest voices) get their way.